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91_SB1118ham003
LRB9102874PTpkam04
1 AMENDMENT TO SENATE BILL 1118
2 AMENDMENT NO. . Amend Senate Bill 1118 on page 1,
3 line 5, after "207," by inserting "304,"; and
4 on page 27, below line 10, by inserting the following:
5 "(35 ILCS 5/304) (from Ch. 120, par. 3-304)
6 Sec. 304. Business income of persons other than
7 residents.
8 (a) In general. The business income of a person other
9 than a resident shall be allocated to this State if such
10 person's business income is derived solely from this State.
11 If a person other than a resident derives business income
12 from this State and one or more other states, then, for tax
13 years ending on or before December 30, 1998, and except as
14 otherwise provided by this Section, such person's business
15 income shall be apportioned to this State by multiplying the
16 income by a fraction, the numerator of which is the sum of
17 the property factor (if any), the payroll factor (if any) and
18 200% of the sales factor (if any), and the denominator of
19 which is 4 reduced by the number of factors other than the
20 sales factor which have a denominator of zero and by an
21 additional 2 if the sales factor has a denominator of zero.
22 For tax years ending on or after December 31, 1998, and
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1 except as otherwise provided by this Section, persons other
2 than residents who derive business income from this State and
3 one or more other states shall compute their apportionment
4 factor by weighting their property, payroll, and sales
5 factors as provided in subsection (h) of this Section.
6 (1) Property factor.
7 (A) The property factor is a fraction, the
8 numerator of which is the average value of the person's
9 real and tangible personal property owned or rented and
10 used in the trade or business in this State during the
11 taxable year and the denominator of which is the average
12 value of all the person's real and tangible personal
13 property owned or rented and used in the trade or
14 business during the taxable year.
15 (B) Property owned by the person is valued at its
16 original cost. Property rented by the person is valued at
17 8 times the net annual rental rate. Net annual rental
18 rate is the annual rental rate paid by the person less
19 any annual rental rate received by the person from
20 sub-rentals.
21 (C) The average value of property shall be
22 determined by averaging the values at the beginning and
23 ending of the taxable year but the Director may require
24 the averaging of monthly values during the taxable year
25 if reasonably required to reflect properly the average
26 value of the person's property.
27 (2) Payroll factor.
28 (A) The payroll factor is a fraction, the numerator
29 of which is the total amount paid in this State during
30 the taxable year by the person for compensation, and the
31 denominator of which is the total compensation paid
32 everywhere during the taxable year.
33 (B) Compensation is paid in this State if:
34 (i) The individual's service is performed
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1 entirely within this State;
2 (ii) The individual's service is performed
3 both within and without this State, but the service
4 performed without this State is incidental to the
5 individual's service performed within this State; or
6 (iii) Some of the service is performed within
7 this State and either the base of operations, or if
8 there is no base of operations, the place from which
9 the service is directed or controlled is within this
10 State, or the base of operations or the place from
11 which the service is directed or controlled is not
12 in any state in which some part of the service is
13 performed, but the individual's residence is in this
14 State.
15 Beginning with taxable years ending on or after
16 December 31, 1992, for residents of states that impose a
17 comparable tax liability on residents of this State, for
18 purposes of item (i) of this paragraph (B), in the case
19 of persons who perform personal services under personal
20 service contracts for sports performances, services by
21 that person at a sporting event taking place in Illinois
22 shall be deemed to be a performance entirely within this
23 State.
24 (3) Sales factor.
25 (A) The sales factor is a fraction, the numerator
26 of which is the total sales of the person in this State
27 during the taxable year, and the denominator of which is
28 the total sales of the person everywhere during the
29 taxable year.
30 (B) Sales of tangible personal property are in this
31 State if:
32 (i) The property is delivered or shipped to a
33 purchaser, other than the United States government,
34 within this State regardless of the f. o. b. point
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1 or other conditions of the sale; or
2 (ii) The property is shipped from an office,
3 store, warehouse, factory or other place of storage
4 in this State and either the purchaser is the United
5 States government or the person is not taxable in
6 the state of the purchaser; provided, however, that
7 premises owned or leased by a person who has
8 independently contracted with the seller for the
9 printing of newspapers, periodicals or books shall
10 not be deemed to be an office, store, warehouse,
11 factory or other place of storage for purposes of
12 this Section. Sales of tangible personal property
13 are not in this State if the seller and purchaser
14 would be members of the same unitary business group
15 but for the fact that either the seller or purchaser
16 is a person with 80% or more of total business
17 activity outside of the United States and the
18 property is purchased for resale.
19 (B-1) Patents, copyrights, trademarks, and similar
20 items of intangible personal property.
21 (i) Gross receipts from the licensing, sale,
22 or other disposition of a patent, copyright,
23 trademark, or similar item of intangible personal
24 property are in this State to the extent the item is
25 utilized in this State during the year the gross
26 receipts are included in gross income.
27 (ii) Place of utilization.
28 (I) A patent is utilized in a state to
29 the extent that it is employed in production,
30 fabrication, manufacturing, or other processing
31 in the state or to the extent that a patented
32 product is produced in the state. If a patent
33 is utilized in more than one state, the extent
34 to which it is utilized in any one state shall
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1 be a fraction equal to the gross receipts of
2 the licensee or purchaser from sales or leases
3 of items produced, fabricated, manufactured, or
4 processed within that state using the patent
5 and of patented items produced within that
6 state, divided by the total of such gross
7 receipts for all states in which the patent is
8 utilized.
9 (II) A copyright is utilized in a state
10 to the extent that printing or other
11 publication originates in the state. If a
12 copyright is utilized in more than one state,
13 the extent to which it is utilized in any one
14 state shall be a fraction equal to the gross
15 receipts from sales or licenses of materials
16 printed or published in that state divided by
17 the total of such gross receipts for all states
18 in which the copyright is utilized.
19 (III) Trademarks and other items of
20 intangible personal property governed by this
21 paragraph (B-1) are utilized in the state in
22 which the commercial domicile of the licensee
23 or purchaser is located.
24 (iii) If the state of utilization of an item
25 of property governed by this paragraph (B-1) cannot
26 be determined from the taxpayer's books and records
27 or from the books and records of any person related
28 to the taxpayer within the meaning of Section 267(b)
29 of the Internal Revenue Code, 26 U.S.C. 267, the
30 gross receipts attributable to that item shall be
31 excluded from both the numerator and the denominator
32 of the sales factor.
33 (B-2) Gross receipts from the license, sale, or
34 other disposition of patents, copyrights, trademarks, and
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1 similar items of intangible personal property may be
2 included in the numerator or denominator of the sales
3 factor only if gross receipts from licenses, sales, or
4 other disposition of such items comprise more than 50% of
5 the taxpayer's total gross receipts included in gross
6 income during the tax year and during each of the 2
7 immediately preceding tax years; provided that, when a
8 taxpayer is a member of a unitary business group, such
9 determination shall be made on the basis of the gross
10 receipts of the entire unitary business group.
11 (C) Sales, other than sales governed by paragraphs
12 (B) and (B-1) of tangible personal property, are in this
13 State if:
14 (i) The income-producing activity is performed
15 in this State; or
16 (ii) The income-producing activity is
17 performed both within and without this State and a
18 greater proportion of the income-producing activity
19 is performed within this State than without this
20 State, based on performance costs.
21 (D) For taxable years ending on or after December
22 31, 1995, the following items of income shall not be
23 included in the numerator or denominator of the sales
24 factor: dividends; amounts included under Section 78 of
25 the Internal Revenue Code; and Subpart F income as
26 defined in Section 952 of the Internal Revenue Code. No
27 inference shall be drawn from the enactment of this
28 paragraph (D) in construing this Section for taxable
29 years ending before December 31, 1995.
30 (E) Paragraphs (B-1) and (B-2) shall apply to tax
31 years ending on or after December 31, 1999, provided that
32 a taxpayer may elect to apply the provisions of these
33 paragraphs to prior tax years. Such election shall be
34 made in the form and manner prescribed by the Department,
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1 shall be irrevocable, and shall apply to all tax years;
2 provided that, if a taxpayer's Illinois income tax
3 liability for any tax year, as assessed under Section 903
4 prior to January 1, 1999, was computed in a manner
5 contrary to the provisions of paragraphs (B-1) or (B-2),
6 no refund shall be payable to the taxpayer for that tax
7 year to the extent such refund is the result of applying
8 the provisions of paragraph (B-1) or (B-2) retroactively.
9 In the case of a unitary business group, such election
10 shall apply to all members of such group for every tax
11 year such group is in existence, but shall not apply to
12 any taxpayer for any period during which that taxpayer is
13 not a member of such group.
14 (b) Insurance companies.
15 (1) In general. Except as otherwise provided by
16 paragraph (2), business income of an insurance company
17 for a taxable year shall be apportioned to this State by
18 multiplying such income by a fraction, the numerator of
19 which is the direct premiums written for insurance upon
20 property or risk in this State, and the denominator of
21 which is the direct premiums written for insurance upon
22 property or risk everywhere. For purposes of this
23 subsection, the term "direct premiums written" means the
24 total amount of direct premiums written, assessments and
25 annuity considerations as reported for the taxable year
26 on the annual statement filed by the company with the
27 Illinois Director of Insurance in the form approved by
28 the National Convention of Insurance Commissioners or
29 such other form as may be prescribed in lieu thereof.
30 (2) Reinsurance. If the principal source of
31 premiums written by an insurance company consists of
32 premiums for reinsurance accepted by it, the business
33 income of such company shall be apportioned to this State
34 by multiplying such income by a fraction, the numerator
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1 of which is the sum of (i) direct premiums written for
2 insurance upon property or risk in this State, plus (ii)
3 premiums written for reinsurance accepted in respect of
4 property or risk in this State, and the denominator of
5 which is the sum of (iii) direct premiums written for
6 insurance upon property or risk everywhere, plus (iv)
7 premiums written for reinsurance accepted in respect of
8 property or risk everywhere. For purposes of this
9 paragraph, premiums written for reinsurance accepted in
10 respect of property or risk in this State, whether or not
11 otherwise determinable, may, at the election of the
12 company, be determined on the basis of the proportion
13 which premiums written for reinsurance accepted from
14 companies commercially domiciled in Illinois bears to
15 premiums written for reinsurance accepted from all
16 sources, or, alternatively, in the proportion which the
17 sum of the direct premiums written for insurance upon
18 property or risk in this State by each ceding company
19 from which reinsurance is accepted bears to the sum of
20 the total direct premiums written by each such ceding
21 company for the taxable year.
22 (c) Financial organizations.
23 (1) In general. Business income of a financial
24 organization shall be apportioned to this State by
25 multiplying such income by a fraction, the numerator of
26 which is its business income from sources within this
27 State, and the denominator of which is its business
28 income from all sources. For the purposes of this
29 subsection, the business income of a financial
30 organization from sources within this State is the sum of
31 the amounts referred to in subparagraphs (A) through (E)
32 following, but excluding the adjusted income of an
33 international banking facility as determined in paragraph
34 (2):
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1 (A) Fees, commissions or other compensation
2 for financial services rendered within this State;
3 (B) Gross profits from trading in stocks,
4 bonds or other securities managed within this State;
5 (C) Dividends, and interest from Illinois
6 customers, which are received within this State;
7 (D) Interest charged to customers at places of
8 business maintained within this State for carrying
9 debit balances of margin accounts, without deduction
10 of any costs incurred in carrying such accounts; and
11 (E) Any other gross income resulting from the
12 operation as a financial organization within this
13 State. In computing the amounts referred to in
14 paragraphs (A) through (E) of this subsection, any
15 amount received by a member of an affiliated group
16 (determined under Section 1504(a) of the Internal
17 Revenue Code but without reference to whether any
18 such corporation is an "includible corporation"
19 under Section 1504(b) of the Internal Revenue Code)
20 from another member of such group shall be included
21 only to the extent such amount exceeds expenses of
22 the recipient directly related thereto.
23 (2) International Banking Facility.
24 (A) Adjusted Income. The adjusted income of
25 an international banking facility is its income
26 reduced by the amount of the floor amount.
27 (B) Floor Amount. The floor amount shall be
28 the amount, if any, determined by multiplying the
29 income of the international banking facility by a
30 fraction, not greater than one, which is determined
31 as follows:
32 (i) The numerator shall be:
33 The average aggregate, determined on a
34 quarterly basis, of the financial
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1 organization's loans to banks in foreign
2 countries, to foreign domiciled borrowers
3 (except where secured primarily by real estate)
4 and to foreign governments and other foreign
5 official institutions, as reported for its
6 branches, agencies and offices within the state
7 on its "Consolidated Report of Condition",
8 Schedule A, Lines 2.c., 5.b., and 7.a., which
9 was filed with the Federal Deposit Insurance
10 Corporation and other regulatory authorities,
11 for the year 1980, minus
12 The average aggregate, determined on a
13 quarterly basis, of such loans (other than
14 loans of an international banking facility), as
15 reported by the financial institution for its
16 branches, agencies and offices within the
17 state, on the corresponding Schedule and lines
18 of the Consolidated Report of Condition for the
19 current taxable year, provided, however, that
20 in no case shall the amount determined in this
21 clause (the subtrahend) exceed the amount
22 determined in the preceding clause (the
23 minuend); and
24 (ii) the denominator shall be the average
25 aggregate, determined on a quarterly basis, of
26 the international banking facility's loans to
27 banks in foreign countries, to foreign
28 domiciled borrowers (except where secured
29 primarily by real estate) and to foreign
30 governments and other foreign official
31 institutions, which were recorded in its
32 financial accounts for the current taxable
33 year.
34 (C) Change to Consolidated Report of Condition
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1 and in Qualification. In the event the Consolidated
2 Report of Condition which is filed with the Federal
3 Deposit Insurance Corporation and other regulatory
4 authorities is altered so that the information
5 required for determining the floor amount is not
6 found on Schedule A, lines 2.c., 5.b. and 7.a., the
7 financial institution shall notify the Department
8 and the Department may, by regulations or otherwise,
9 prescribe or authorize the use of an alternative
10 source for such information. The financial
11 institution shall also notify the Department should
12 its international banking facility fail to qualify
13 as such, in whole or in part, or should there be any
14 amendment or change to the Consolidated Report of
15 Condition, as originally filed, to the extent such
16 amendment or change alters the information used in
17 determining the floor amount.
18 (d) Transportation services. Business income derived
19 from furnishing transportation services shall be apportioned
20 to this State in accordance with paragraphs (1) and (2):
21 (1) Such business income (other than that derived
22 from transportation by pipeline) shall be apportioned to
23 this State by multiplying such income by a fraction, the
24 numerator of which is the revenue miles of the person in
25 this State, and the denominator of which is the revenue
26 miles of the person everywhere. For purposes of this
27 paragraph, a revenue mile is the transportation of 1
28 passenger or 1 net ton of freight the distance of 1 mile
29 for a consideration. Where a person is engaged in the
30 transportation of both passengers and freight, the
31 fraction above referred to shall be determined by means
32 of an average of the passenger revenue mile fraction and
33 the freight revenue mile fraction, weighted to reflect
34 the person's
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1 (A) relative railway operating income from
2 total passenger and total freight service, as
3 reported to the Interstate Commerce Commission, in
4 the case of transportation by railroad, and
5 (B) relative gross receipts from passenger and
6 freight transportation, in case of transportation
7 other than by railroad.
8 (2) Such business income derived from
9 transportation by pipeline shall be apportioned to this
10 State by multiplying such income by a fraction, the
11 numerator of which is the revenue miles of the person in
12 this State, and the denominator of which is the revenue
13 miles of the person everywhere. For the purposes of this
14 paragraph, a revenue mile is the transportation by
15 pipeline of 1 barrel of oil, 1,000 cubic feet of gas, or
16 of any specified quantity of any other substance, the
17 distance of 1 mile for a consideration.
18 (e) Combined apportionment. Where 2 or more persons are
19 engaged in a unitary business as described in subsection
20 (a)(27) of Section 1501, a part of which is conducted in this
21 State by one or more members of the group, the business
22 income attributable to this State by any such member or
23 members shall be apportioned by means of the combined
24 apportionment method.
25 (f) Alternative allocation. If the allocation and
26 apportionment provisions of subsections (a) through (e) and
27 of subsection (h) do not fairly represent the extent of a
28 person's business activity in this State, the person may
29 petition for, or the Director may require, in respect of all
30 or any part of the person's business activity, if reasonable:
31 (1) Separate accounting;
32 (2) The exclusion of any one or more factors;
33 (3) The inclusion of one or more additional factors
34 which will fairly represent the person's business
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1 activities in this State; or
2 (4) The employment of any other method to
3 effectuate an equitable allocation and apportionment of
4 the person's business income.
5 (g) Cross reference. For allocation of business income
6 by residents, see Section 301(a).
7 (h) For tax years ending on or after December 31, 1998,
8 the apportionment factor of persons who apportion their
9 business income to this State under subsection (a) shall be
10 equal to:
11 (1) for tax years ending on or after December 31,
12 1998 and before December 31, 1999, 16 2/3% of the
13 property factor plus 16 2/3% of the payroll factor plus
14 66 2/3% of the sales factor;
15 (2) for tax years ending on or after December 31,
16 1999 and before December 31, 2000, 8 1/3% of the property
17 factor plus 8 1/3% of the payroll factor plus 83 1/3% of
18 the sales factor;
19 (3) for tax years ending on or after December 31,
20 2000, the sales factor.
21 If, in any tax year ending on or after December 31, 1998 and
22 before December 31, 2000, the denominator of the payroll,
23 property, or sales factor is zero, the apportionment factor
24 computed in paragraph (1) or (2) of this subsection for that
25 year shall be divided by an amount equal to 100% minus the
26 percentage weight given to each factor whose denominator is
27 equal to zero.
28 (Source: P.A. 89-379, eff. 1-1-96; 89-399, eff. 8-20-95;
29 89-626, eff. 8-9-96; 90-562, eff. 12-16-97; 90-613, eff.
30 7-9-98.)".